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Infrastructure projects set to drive GCC spending - QNB

New QNB Group report says spending as percentage of GDP to increase to 8.2% in 2013

GCC construction, Middle East construction

By Andy Sambidge

Sun 29 Sep 2013 02:10 PM

GCC governments are expected to raise their capital budgets to more than eight percent of the region's GDP this year as spending on infrastructure projects soars, a new report said on Sunday.

After spending $112bn on capital projects in 2012, QNB Group said it forecasts expenditure to rise from 7.1 percent to 8.2 percent of gross domestic product.

The research said this will be the second highest share on record after 2009 which was distorted because low oil prices that year reduced regional GDP by 19 percent.

Rail schemes such as the Doha, Riyadh and Abu Dhabi metros and the high speed inter-city rail network under construction in Saudi Arabia, will all boost GCC capital spending going forward, QNB Group said.

"Effective public capital expenditure in the GCC is even larger than the budget data suggests. This is because government agencies sometimes spend off budget and because of the usage of public private partnerships for some megaprojects," the report said.

It added that there were "significant differences" in relative spending levels between Gulf states.

Looking ahead, QNB Group said it expects that government capital expenditure, both direct and through public-private partnerships, will remain high throughout the GCC over at least the next decade.

Common themes across the region include rail networks to relieve congestion in major cities and connect the Gulf's major coastal hubs, it said.

Also further expansions are planned in power and water desalination capacity plus social spending on schools, hospitals and housing.

Many GCC countries have medium term spending plans running into hundreds of billions of dollars.

Saudi Arabia committed in 2011 to invest $67bn on housing alone, to build half a million new homes. Meanwhile, Abu Dhabi has committed to $90bn in capital expenditure between 2013-17.